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It's getting rosier

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by Peter Switzer

Another positive day on Wall Street and you get the feeling that positive sentiment is starting to compete effectively with the negative types who have been in control of the New York Stock Exchange since April this year.

However, the battle of the bulls over the bears has not been won yet – Friday’s revelations from Europe on the bank stress tests will be vital to where the market heads next.

Out of the Big Apple, cyclicals such as energy and materials had a good day and even retail and homebuilders were attracting buyers. These are good signs.

The Dow was up 0.74 per cent to 10,229.96, while the S&P 500 put on 1.14 per cent to 1083.48.

Also, the VIX or fear index dropped below 24 and the market was helped by Goldman Sachs beating market expectations.

Techs also did well with IBM’s price target upgraded by one important analyst and Apple blew the market away with another great result.

The homebuilders’ shares went up, despite housing starts dropping to the lowest level in eight months. This is another good sign and it could mean housing is close to turning up.

This followed a report yesterday that oil prices also headed up to $US77.44 a barrel and the Oz dollar was stronger as well. The little Aussie bleeder was up to 88.36 US cents.

There is still a big week ahead with more US companies to report and these will be important for gathering this more positive picture. In fact, Yahoo predicts a nice rise in revenue in the third quarter. However, my main focus will be Europe and those bank stress tests.

Finally, Charlie Aitken from Southern Cross Equities, who turned negative on my Sky News Business Channel program around April, getting the market spot on, last night showed up positive arguing there is terrific value in the market. He was very bullish and even gave Rio Tinto a big tick. Aitken has always been a BHP booster but he now thinks both miners look great value, especially for the long-term investor.

Keep your eye on the following for the week to come:

Wednesday: Weekly mortgage applications; Bernanke testifies before Congress; weekly crude inventories; earnings from Coca-Cola, Morgan Stanley, UTX, Wells Fargo, US Bancorp, eBay and Qualcomm.
Thursday: European Central Bank meeting; weekly jobless claims; Fed's Dudley speaks; existing-home sales; leading indicators; earnings from AT&T, Caterpillar, 3M, Travelers, UPS, BB&T, Fifth Third, KeyCorp, Nokia, PNC Bank, SunTrust, Amazon, American Express, Microsoft and Capital One.
Friday: EU bank stress-test results; earnings from Ford and McDonald's.

For advice you can trust, contact Switzer Financial Services.

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Published on: Wednesday, July 21, 2010